Channel partnerships are key to success in the tech sector – not only for early stage and startup companies, but increasingly for niche sector leaders and established multi-product players who cannot create a one-stop shop for customers through internal engineering alone.

A partnership that makes good commercial success is often easy to identify, even easier to get excited about and difficult to close. Between that moment of initial excitement and ironing out the details, I have found there are three straight forward questions you should ask a perspective partner to see if you are one the same page as you.

1. How to you measure the commercial value of this opportunity?

New partners often get overly excited about the potential brand fit with a partner – proclaiming things like, “our product would be a perfect fit with the Walmart / Starbucks / Old Navy” in-store customer experience” or “our software perfectly extends the capability of the Saleforce / OpenText / Google platform”.

That inspirational moment where you identify fit is critical to sparking a partnership – but move past it quickly. A year into a deal, no one will be talking about fit or alignment – they will be looking at results. Understand form your partner what KPIs (key performance indicators) will define success – in direct sales, incremental sales, gross / net revenues, repeat sales or whatever other quantifiable metrics are going to secure and enhance the partnership for years to come. If your partner is looking to a partnership to sell your product or service as a tactic to achieve other commercial objectives (think enhance loyalty, grow sales of a related product or grow traffic to a location or site), know that upfront and define success.

2. What do you expect us to achieve, in what time frame and how did you arrive at that conclusion?

With your KPIs identified, you need to establish targets around each. Think of this in terms of a range of results – minimum acceptable, target and stretch. Don’t just negotiate to the target numbers though – flush out the logic behind how the target number was derived. This will provide you with lots of data points and could flag potential issues early.

3. How will be work together to resolve a customer impact if something goes wrong?

Channel partnerships are great when things are going well and everyone is making money – but what happens when there is a bump in the road a customer is impacted?

Beyond the legalize of warranties and indemnities, you want to understand how your partner will respond is tough times so you can plan accordingly. Generally, the channel owner will provide level one and level two support and the product owner will provide level three support; but, go deeper than simply divvying up responsibility by asking this question.

Your potential partner’s response should give you valuable insights into how they value customers and how critical your product is to their customers’ experience. If possible, ask for previous examples of where something went wrong with another partner and what the outcome was.

Asking these questions early on will not only give you a better idea of what your channel partner is all about, it will save you time and money by making sure the potential partnership is a real, and not an aspirational, fit.

How many times in business have you seen someone pause at that critical moment in a meeting and ask, “So, what value do you add?”

Decision makers, especially in middle-management, are obsessed with an ill conceived veil of value. They use the term as code to really ask potential partners how much money can be made by working with them. Sometimes a more strategic response is desired, but most decision makers zero in on a quantifiable answer that is safe and justifiable up the food chain.

In other words, how much money will their company make.

While forecasting the revenue potential of a partnership is important, revenue is an outcome of value and not the foundation for building a partnership. True value is contained in your product, and it is amplified by a good partnership. Let’s differentiate between product strategy and partner strategy:

The better question to ask a partner (and yourself) is, “Why should I bet my reputation and resources on you?” If you can answer this question, you will truly understand the value of the partnership and profits should follow.

The best partners will understand this contrast. When building a new partnership (or even when evaluating an existing one), follow these best practices:

Understand the contract – use a lawyer and pay the fees

Define your value to the partner

Define your partner’s value to you

Use partner scorecards – update progress quarterly

Make sure you are included in the partners’s business plan

Make sure you have top level buy-in – on both sides

Look for personal buy in from stakeholders

Make sure there is a good reason to partner

Don’t let one negative incident ruin the partnership

Only positive talk about a partner

Finally, commit to the idea of a partner life cycle. Not every partnership is meant to last a long time and using a partner scorecard will allow you to track where you are in the life cycle.. Are you gearing up and mobilizing support in the early stages? Are you demonstrating commitment and seeing continued growth? Is the partnership mature, requiring you to revisit it to redefine value?

If the rationale isn’t there to continue to bet your resources and reputation on a partner, wind the relationship down and part as friends. Markets move, requirements change – new opportunities will be on the horizon.

This is part 3 of a 3 part blog series on developing a winning partnership strategy for your company. You can read part 1 here and part 2 here.

Fresh off of a successful Consumer Electronics Show and the announcement of the acquisition of DivX, the brains at NeuLion have put together an outlook for the coming year. You can access the full presentation here, but if your attention span is a little shorter, here are five highlights that I believe are particularly noteworthy:

Content is going direct to consumers: Content owners like CBS, HBO and ESPN are moving to launch direct-to-consumer services driven by changing consumer behavior (more content is being viewed via online streaming and linear TV viewing is down). Media companies are able to develop one-on-one relationships with viewers, acquire more data and customize new revenue streams

The industry is all in on 4K: 11.6 million 4K (ultra-high definition) enabled devices shipped in 2014 – up 700% year-over-year. By 2018, 4K devices are forecast to represent 38% of the market. Major OTT content providers are beginning to offer content to subscribers.

Multi-platform content delivery is still king: Multi-platform delivery was the most important item on Devoncroft’s Big Broadcast Survey (4K was number four). Accelerating sales of connected devices illustrates this tend: Smart TVs overtook sales of non-connected TVs in 2014. Second gen XBOX and Play Station sales are well ahead of the last generation of consoles at the same point in their life cycle. Phablet sales outpaced laptop sales in 2014 and will outpace tablet sales in 2015. All this to say, the big players are all betting on a multi-device UX optimized for mobile accessibility.

International market content consumption is outpacing the USA: Global online TV and video revenues will surpass $42B USD in 2020, up from $19.3B USD in 2014. While the US remains the dominant OTT TV territory, its share of total revenues is forecast to decline from 59% in 2010 to 37% in 2020.

Global SVOD / PPV revenues will soar: Online TV and video subscription revenues will climb from $1.06B in 2010 to $7.65B in 2014 and onto $16.77B in 2020. The purchase of physical media and digital downloads are both declining as consumers become increasingly comfortable with renting content by paying for access to subscription services.

We are seeing a watershed moment in the history of TV and video content. The shifting to internet TV is akin to when TV overtook radio, and then later when cable overtook broadcast. Is your content ready to capitalize on this new world?

When we talk about partnerships, more often than not what we are really taking about are distribution partners – channel partners extend the sales reach of your organization. Getting channel partnerships right is particularly important for early stage companies who have fewer resources and less ability to absorb the cost and time associated with partnerships that don’t work out.

Know Your Product – Before entering into a channel partnership make sure you have an in-depth understanding of each component of your product and an inventory of all dependencies on outside parties – hardware, software, peripherals, connectivity, core services and complimentary services are common components when it comes to early stage tech companies. It is easy to overlook everyday external operational dependencies

Complexity – Once the inventory of external dependencies of your product is identified, each existing or potential partnership should be considered in terms of both market complexity and product complexity. The higher the distribution partner ranks in both of these categories, the more time and resources your company will have to put into the partnership – be realistic and make sure you’re up for it as a company.

Set Realistic Expectations – If you are convinced you can manage the partnership, you need to understand what your company is going to get out of it, both in terms of revenue and the further development of your product’s core competency Think of it as follows:

Obviously strategic partnerships should be your main focus – these are the ones that will keep the lights on and while also getting your closer to your end goal.

The Partner Perspective – So you have allocated your company’s resources accordingly and are on the verge of signing a deal with the strategic partner who will take you to the next big iteration of success? Great – but before you get too excited, pause to analyse the partnership from the partner’s perspective too. Is your product key to their go-to-market strategy?

If you find there is high value to both your company and the partner – then you have a strategic synergy and the best case scenario at hand. If it is strategically important to the partner, but less so to your company, you may still have a good revenue opportunity and a partnership worth pursuing. Conversely, if the strategic importance is low for both companies, you likely have a mismatch in front of you and a partnership that you are likely better off without.

Where most early stage companies run into trouble is with partnerships that have a high alignment to their own company’s product strategy, but low value to your perspective partner’s strategy. In this situation you are likely to get orphaned should the deal get signed. An orphan partnership is a vacuum that must be avoided at all costs, but aspirations and human nature can cloud judgement and make it difficult to see the the potential for an orphan partnership before resources have been expended. A knowledgeable advisory board and good mentors are great resources to consult for an objective take on the partners perspective.

Following the steps outlined above will allow you to prioritize partnerships and allocate resources appropriately. It will set up your company up to implement a best practices in partner management – which will be discussed in the final blog entry of this partner program series.

This is part 2 on developing a winning partnership strategy for your company. You can read part 1 here.

If video killed the radio star, social media may be killing the free press.

Last week Target made headlines in Canada for all the wrong reasons. The story arose because a few customers (or guests as Target likes to call them) snapped a picture of two pairs of kids pajamas inspired by popular DC Comics superheroes. One pair featured the message “Future Man of Steel”, the other pair stated, “I Only Date Heroes”.

While not trying to debate the suitability of a young girl’s pajamas inscribed with messaging about who they may or may not want to someday date, there can be no doubt that the resulting Twitter and online outrage was stoked by the contrast between the two messages – the picture of the PJs (which went viral) was clearly taken to maximize the difference between how consumer society treats little girls and little boys – little girls should want to date heroes and little boys should grow up to be heroes. Of course, this is offensive to many.

When I visited my local Target store this week, I was surprised to see that there were in fact a bunch of other pajama choices in this DC Comics line – a girl’s set with the message “Cuttest Hero Ever” and a boys set stating, “I Spent Nine Months in the Bat Cave” to name only two.

When you see the all the messages, it suddenly didn’t seem quite as misogynistic.

Troubling is not that the photo went viral on social media (individuals presenting a skewed subset of the facts to support their pre-existing position is nothing new); troubling is that the mainstream media jumped on this story without seemingly knowing all the facts – happy to echo the message initiated by a handful of online influencers who had not presented a fair and balanced story to begin with.

The cynical view is that we have no one to blame but ourselves – online news sources (and newspapers especially) have struggled mightily to replicate the revenues they derived from their journalistic efforts in the pre-digital world. Consumers have consistently rejected their online business models, seemingly expecting to get content for free In fact, publishers have increasingly turned to revenue models which blur the line between editorial independence and sponsored content, This can’t end well.

But at the heart of every problem, lies opportunity. Social tools have emerged which designate influence (Topsy). and allow for social sourcing of news (Hubub) in a potentially more balanced way. Other services, like Newsie (which was acquired by Linkedin in July) scan the Internet for mentions of anyone in your social networks, Flipboard and Pulse (also acquired by Linkedin) aim to give your social feeds a more magazine-like look and feel. In fact, social platforms like Linkedin are increasingly focusing on the publishing content as a strategy for engaging and retaining users. Will Linkedin tomorrow be the Forbes of today?

Whether its kids pajamas, politics, sports or any other issue worthy of public attention and discourse, two things are clear – the very nature of content is changing and the killer app is still waiting to be developed. The next great online CEO may be the one who figures out the dichotomy of providing quality, objective content that consumers are willing to pay for.

This is part 1 of a 3 part blog series on structuring a winning partnership strategy for your company.

Ask the leadership of any company that has scaled its sales and operations, and they will likely tell you that partners are essential to success. Fewer companies,however, have a focused and disciplined approach on managing their partners.

One reason is that partnership management is often not built to answer the right question. We’re all familiar with the traditional value proposition question:“why should I buy your product?” This question is often applied to partners when really the superior question is actually,“why should we bet our resources and reputation on you?”

This universal question can be applied to all partners, but it is also useful to group partners into three general categories: supply, distribution and influence. The very first step in building a successful partner strategy is understanding these three categories and grouping existing partners accordingly.

Supply Partners: The supply partner can provide your company with a broad range of products – everything from paper and pens to integral components of the end solution you sell to your customers. Some companies will manage all of these relationships through a Procurement function – more advanced programs will distinguish between supply partners whose products are used in the regular course of business operations (think paper and pen vendors) and the supply partners whose products have direct implications on product strategy.

The strategic analysis when managing these partners: is buy vs. build. Successful management of these vendors will create cost reductions and increased focus on your company’s core competency and will enable a faster time to market; It may also allow you to offer a more complete product offering to the market by including third party technology or products which compliment your company’s own.

Distribution (or Channel Partners): Channel partners extend the sales reach of your organization. They can be direct or indirect in nature and generally help to accelerate time to market (though they may be absolutely necessary to even operate in some markets where significant barriers to entry exist). Channel partnerships are particularly important for early stage companies that can quite often get caught in the chasm of needing to grow sales capabilities while not having the resources required to hire and manage a dispersed sales force.

My next blog entry will provide more focus on channel partners and applying basic portfolio principles for the effective development of a partner portfolio.

Influence Partners: This is admittedly a bit of an “other” category, but it is important nonetheless. The strategic analysis with these partners generally focuses on the delta of achieving a defined goal alone vs. in partnership. Examples can include marketing partners, association partners, co-selling partners, ecosystem partners and government partners

If you lead a technology company, you likely know that the only thing harder to find than a good coder is a top tier account exec. There is a premium on qualified business development people that can take your company to the next level – and, surprisingly, you might be overlooking those could fit the description.

About 85% of an iceberg’s mass lies underneath the surface of the ocean. Likewise, the best sales talent your organization can find may come from applicants with unconventional backgrounds or even those already working for you in other functions.

Mark Murphy, author of Hiring for Attitude, tracked over 20,000 new hires and found that 46% of them fail in first 19 months and 89% fail due to behavioral reasons or attitude If you do that math, that means only one in twenty hires fails because of their hard skill set whereas two in five fail because of their soft skills.

Despite this and much more supporting data, applicants for sales or business development roles are generally filtered by linear, experience-centric questions such as: “have you carried a quota before” or. “what is the biggest deal you have closed”. What I find most ironic about this is that most startup founders or early stage execs, by applying this logic, likely would have declined their own application.

When it comes to identifying potential high performing business development talent, what you need to know can be assessed with four criteria:

Emotional Intelligence: You will quickly get a feel for an applicant’s EQ when you are interviewing them, but look for a history of community engagement, public speaking and / or customer-facing experience on a CV. I personally got a lot out of early career experience interacting with customers on the front-line. In the long run, if an applicant does not like interacting with people, they will not succeed in a role where they have to put up with a lot of politics and personalities.

Customer Orientation: The best sales professionals build enduring relationships and understand the customer both as an individual and in the context of the business. They genuinely approach the job as though they are a partner helping to solve a problem rather than an account executive trying to close a deal. Formal sales approaches like Solutions Based Selling have attempted to codify this skill set, but it really comes down to an ability to partner and deliver value over several quarters or years.

Process Orientation: Sales – and especially B2B sales – are increasingly complex. Processes on both sides of the deal need to be aligned and budget and deployment cycles considered. Moreover, the nature of the sales cycle itself requires an account exec to be organized and meticulous.

Product Expertise: This is where an internal candidate may be able to truly distinguish themselves and become a top performer relatively quickly. A top tier account executive must be an evangelist for your product. In technology, it can take some time to become familiar with the product(s), but you must have confidence that the candidate you;re hiring has the aptitude and smarts to learn your product’s use cases and specifications.

The belief that startups are a young person’s game is completely erroneous. Digital natives, born and raised in the world of social, mobile and Internet, may have had a first mover advantage in launching some of today’s high-profile tech startups, but that means little absent the ageless ability to think in the abstract, challenge accepted norms and persevere through the creative process..

The question thus becomes, how do we create and how has this contributed to the misconception that you have to be young to launch a startup?

The most influential article I have read on the subject was Malcolm Gladwell’s 2008 piece in the New Yorker, “Late Bloomers“. Once I got past his rather loquacious back story of Picasso and Cézanne (and forgave him for following up Outliers with Blink), his insightful hypothesis became clear, society easily recognizes individuals who possess a creative vision (think Jobs, Zuckerberg, Mozart or Picasso). We label these individuals prodigies and we try to emulate them – even though we do not (and cannot) create in the same way they do. The vast majority of us, are more like Cézanne – we create through an experimental process which can span years or even decades. The challenge is that, before success is achieved, the work of the experimental creative, or late bloomer, cannot be distinguished from the average and, therefore, potential goes unrecognized..

Before sympathy for the late bloomer overwhelms you, check out my SlideShare presentation at the end of this post which highlights ten disruptors, media tycoons and titans of tech that found success well into their 30’s and 40’s.

A hypothesis and anecdotal evidence is one thing, quantifiable data is another. “Is There A Peak Age for Entrepreneurship?“, a 2011 TechCrunch article by Adeo Ressi (founder of the Founder Institute) is the best piece I have read on the issue of age correlating to startup success. In order to identify the traits of successful entrepreneurs, the Founder Institute conducted over 3,000 personality and aptitude tests on applicants worldwide, and then carefully tracked the progress of almost 1,000 enrolled founders and 350 graduates..

The result? Older age has shown in the data to correlate with more successful entrepreneurs up to the age of 40, after which it has limited or no impact. Ressi concluded in full:

Age is only one factor among many to predict the success of entrepreneurs, and anybody at any age can break any molds put forward by “experts.” However, it’s clear that the stories of a few “college-dropout turned millionaire” (or billionaire) startup founders have clouded both the mass media and the tech industry from reality. We have romanticized the idea of a young founder because, well, it’s a great story, but these stories are not the norm. In the end, classic biases of gender, race, and age need to be discarded for a real science of success.

The lesson to be learned? If you create through trial and error, as most of us do, you’re just hitting your stride by 40 so go conquer the world!

If you run an early stage tech or Internet company, you might relate to Lando Calrissian. Lando was running his small cloud-based business when the Empire (insert your favorite $100B plus market cap player) showed up and made him an offer he couldn’t refuse. Reluctantly Lando agreed to their terms, but the deal just kept getting worse and worse.

Don’t give into your anger – after all, if you strike down negotiations, you will never sell more than you can possibly imagine!

Although you will not be able to dictate terms to a much larger prospective channel partner, being aware of six key items will limit your risk and enhance your upside:

1) Non-Compete vs. Non-Disclosure – As a preamble to entering into negotiations, you will be asked to sign a non-disclosure agreement (NDA). It is tempting to sign this quickly and proceed to doing a demo and negotiating a deal, but make sure you review the document for non-compete language. Non-compete terms can be overly restrictive and are generally not applicable to a channel partnership. Non-compete terms may not ultimately be enforceable, but save yourself potential headaches and only agree to non-disclosure.

2) Indemnities and Warranties – If your new partnership goes well, indemnities and warranties may never come into play, but; a contract is there every bit as much to protect against downside as it is to enable upside. When you enter into negotiations with a much larger prospective partner, they will almost certainly provide you with their standard boilerplate contract. Every time I have received such a contract, the indemnities and warranties were written largely to the benefit of the partner who did the drafting. You will have a high success rate if you inform the channel partner that you require indemnities and warranties to be mutual as it is generally difficult to justify doing otherwise.

3) Understand how long it will take to get paid – You would be surprised how many early stage partners I’ve heard express surprise (and dismay) at how long it takes to get payment from their channel partner. Assuming your deal is structured as a royalty split between the two parties, most enterprises will want to report royalties to you on a quarterly basis. Once reported, you may have to issue a purchase order to your channel partner and their standard payment terms could add another 30 to 90 days before you receive payment. Understand how this impacts your cash flow and make sure you can absorb delays.

4) Know the Channel Partner’s EULA – An end user license agreement (EULA) is the contract under which your channel partner will sell your product to their customers. Early in the negotiations, request a copy of the EULA as well as any referenced handbooks or documents. You will not likely be able to affect any changes to these documents during the course of negotiations, but it is critical that you can work with the terms and conditions contained within them. Pay particular attention to support obligations as most big tech companies will want to provide their customers with 24/7 support.

5) Term and Termination – Your early stage company will never be in a weaker position than when you negotiate the initial channel partner deal. The term of an agreement and termination clauses contained within it don’t necessarily dictate when the partnership will end, they also provide opportunities for business terms to be re-negotiated. Make best efforts to align the initial term of the agreement to a planned milestone in your product roadmap – if you have a significant upgrade or new product release timed around termination, you will be better positioned to negotiate new revenue opportunities (and maybe even a better royalty split).

6) R&D Tax Credits – Most governments offer tax credits for eligible R&D work done within their jurisdiction..These credits can be very meaningful for early stage tech or Internet companies and predicated upon conditions such as ownership of the intellectual property or having an exclusive license. If you are licensing technology to your channel partner, make sure you understand the impact that license will have on tax credit eligibility.

Of course, the best advice I can offer you is to engage legal counsel when negotiating any contract, but if you give consideration to the six items above, you will be off to a good start to getting a deal you can grow your company with.

17. July 2014 · Comments Off on Is Content Creation a Loss Leader? · Categories: WEM

Ever since Napster opened the digital door to sharing and downloading music and movies, content producers have been fighting one battle after another in a war to slow the inevitable disruption of their industry.

While some point to iTunes and other legal downloading sites as proof that content can capitalize on online distribution,industry financials paint a clear picture to the contrary. In 2013, digital track sales fell 5.7% and album sales fell 8.4%, according to Billboard. Total U.S. music industry revenues were $7B in 2013, compared to $18.5B in 1997 adjusted for inflation (thanks Yahoo!).

Today, the most successful content creators actually don’t make their money through their “art” – they, leverage it to build cross branding licensing opportunities. Bobby Kotick, the chief executive of Activision recently announced that Aerosmith made far more in revenue off of its Guitar Hero: Aerosmith video game than from any of their albums. LeBron James may have just signed a new $21M annual deal in Cleveland, but he made more than double that in endorsements last year ($53M to be precise). Oprah – the women who leveraged an engaging on air persona to go from Chicago morning show host to the “queen of all media” is worth an estimated $2.9B. She has her own television network and magazine,has created best selling authors just by mentioning a book on air and even has her own line of tea at Starbucks.

The value of affiliating brands and products, clear for so long with celebrity and amplified by digital disruption, has impacted the way companies market to consumers online.

Content marketing (attracting and retaining customers by creating and curating relevant, valuable content) is not an entirely new trend, but it is an expanding one and an area where many startups are developing products. Two interesting companies which I have looked at in this space are TruCentric (recently acquired by Acquia) which tracks user behavior to offer highly customized content experiences (even to anonymous users) and ThisMoment. ThisMoment is particularly noteworthy as it integrates socially generated content in real time to create what it believes consumers will see as a more authentic brand experience.

Selling content in a digital world is a tough value proposition with many challenges and threats, but content has also never been more important to building a successful brand. Technologies which allow brands to scale, automate the marketing process and more accurately deliver engaging content are onto something big.

At A Glance…

Chris Crowell is a creative professional and technology evangelist with 15-plus years of strategic partnership, sales and operations experience in big tech and startups. He holds an LL.B. (JD) and MBA and has extensive board, strategic advisory and community engagement experience. Chris is currently Senior Director of Business Development at NeuLion, a mentor in Communitech's HYPERDRIVE accelerator program, and formerly led Worldwide Licensing at OpenText.